Centralization and Decentralization

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Summary

Centralization and DecentralizationCentralization and Decentralization? Description

An organization has to make strategic and operational decisions. Where and by whom should these decisions be made? And: how should the organization structure be adapted? Centralization and Decentralization are two opposite ways to transfer decision-making power and to change the organizational structure of organizations accordingly.

 

Centralization:

  • Definition: The process of transferring and assigning decision-making authority to higher levels of an organizational hierarchy.
  • In a centralized organization, the decision-making has been moved to higher levels or tiers of the organization, such as a head office, or a corporate center.
  • Knowledge, information and ideas are concentrated at the top, and decisions are cascaded down the organization.
  • The span of control of top managers is relatively broad, and there are relatively many tiers in the organization. Compare: Fayol.

Decentralization:

  • Definition: The process of transferring and assigning decision-making authority to lower levels of an organizational hierarchy.
  • In a decentralized organization, the decision-making has been moved to lower levels or tiers of the organization, such as divisions, branches, departments or subsidiaries.
  • Knowledge, information and ideas are flowing from the bottom to the top of the organization.
  • The span of control of top managers is relatively small, and there are relatively few tiers in the organization, because there is more autonomy in the lower ranks.

Three Forms of decentralization

  • Deconcentration. The weakest form of decentralization. Decision making authority is redistributed to lower or regional levels of the same central organization.
  • Delegation. A more extensive form of decentralization. Through delegation the responsibility for decision-making is transferred to semi-autonomous organizations not wholly controlled by the central organization, but ultimately accountable to it.
  • Devolution. A third type of decentralization is devolution. The authority for decision-making is transferred completely to autonomous organizational units.

Strengths of Centralization. Characteristics

  • Philosophy / emphasis on: top-down control, leadership, vision, strategy.

  • Decision-making: strong, authoritarian, visionary, charismatic.

  • Organizational change: shaped by top, vision of leader.
  • Execution: decisive, fast, coordinated. Able to respond quickly to major issues and changes.
  • Uniformity. Low risk of dissent or conflicts between parts of the organization.

Strengths of Decentralization. Characteristics

  • Philosophy / emphasis on: bottom-up, political, cultural and learning dynamics.
  • Decision-making: democratic, participative, detailed.
  • Organizational change: emerging from interactions, organizational dynamics.
  • Execution: evolutionary, emergent. Flexible to adapt to minor issues and changes.
  • Participation, accountability. Low risk of not-invented-here behavior.

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Benefits of Decentralization. Advantages
1. Greater transparency and accountability.
2. Quick decision making, no long processes
3. Local problems get local solutions.
4. Greater participation by the average worker....
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1 comments
Similarities Between Centralization and Decentralization?
I'm looking for similarities between centralization and decentralization. What do they have in common? I will be grateful for your tips and ideas....
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2 comments
Ricardo Semler: Democratization Instead of Decentralization
Decentralization has been around for very long, but with protracted results due to top-down hierarchical organization structures. Decentralization is only a fad and true decentralization is hardly pra...
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1 comments
The link between Centralization and Decentralization to Public Administration
What is the link between Centralization and Decentralization to Public Administration...
8
 
1 comments
Divisions Versus Subsidiaries
I need some clarification of what is the difference between divisions and subsidiaries. Is there any significant distinction? In the decision making process?...
7
 
1 comments
Decision-making in Germany
Would you say Germany typically has centralized or decentralized decision making?...
6
 
Types of Decentralization. Categories
I am looking for a further classification of decentralization types? Do you have a list of forms of decentralization? Please share them and give an example. Thank you.....
4
 
🔥 NEW The Role of Decentralization in Developing Countries
Improving the communication in development projects in developing countries is very important. Because one major reason for the slow pace of progress in the developing countries has to with the limite...
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2 comments
Direct Communication in Decentralization
Is it possible that in decentralization the first line manager communicates directly with top management?...
3
 
2 comments
Decentralization to Local Government
What is the importance of decentralization to local government?...
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2 comments
Implications of Delegation
How can one evaluate the implications of delegation in private companies, NGOs, and public companies?...
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2 comments
Decentralization Requires Involvement and Empowerment
Decentralization is preferred to centralization in many cases. But decentralized systems need to look at involving each individual at the decentralized unit.
To involve each individual means empo...
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4 comments

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When is Centralization of Decision-making Better?
Please tell me the circumstances under which centralization is better than decentralization? Thanks...
10
 
3 comments

Decentralization Better for Small Businesses?
Decentralization argument works for large businesses. For a small business, it is better to have centralization. Do you agree? Explain....
6
 
5 comments

Crisis: Centralization or Decentralization?
In a crisis situation, which one is better: centralized or decentralized? On one hand in a crisis condition urgent decisions regarding actions have to be made. On the other hand, the need of a democra...
6
 
5 comments

Expert Tips

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Centralization and Decentralization

Advantages and Disadvantages
The main advantage of a centralized organizational structure is that tight control from the top management fixes account...

Key Considerations in Deciding Upon your Organizational Design

Organization Set Up, Organizational Structure, Organizational Structure, Centralization, Span of Control, Departmentaliz
When setting up a business or organization, it is important to think about the roles, processes and relationships within...
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Organization Design

Organizational Development
Good presentation by Stephen Robbins and David Decenzo with lots of example org charts: Identify and define the six ele...

Organizations and Structures

Organizational Structure, Departmentalization, Centralization, Decentralization
Good presentation on Organizational Design. Author: Michael Crandall. First of all the concept of “organizations” is e...

Centralization and Decentralization Diagram

Centralization and Decentralization
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